Funds News

Barcap says commodities set to draw more investors

LONDON (Reuters) - Commodities will attract more investors in 2008, extending a trend that has boosted investment in the asset class by more than $160 billion (82 billion pounds) since 2001, Barclays Capital said.

Commodity assets under management reached $175 billion in 2007, a rise of $41 billion over the year -- second only to the record increase of $48 billion in 2006.

“The recent robust performance of commodity assets despite the difficulties currently facing financial markets suggests further strong growth in 2008,” Barclays Capital wrote in a note published late on Thursday.

Commodity investments are notoriously hard to track because of a lack of clear data.

Barclays Capital bases its assessment of how much money institutional investors, such as pension funds and insurers, have piled into commodities on an analysis of reported figures for exchange-traded commodity products, medium-term notes and U.S. commodity-linked mutual funds.

Institutional investors have classically used long-only commodity indexes, such as the S&P GSCI .SPGSCITR and the Dow Jones AIG .DJAIGTR, to gain access to commodities.

Standard & Poor’s told Reuters investment linked to its S&P GSCI index and other similar indices was estimated to rise to $150 billion in 2008, up from $110 in 2007.

Dow Jones estimated $42 billion was tracking its index by the fourth quarter of 2007 out of a total of $145 billion using long-only index strategies.

As commodities trade grows in sophistication, long-term investors have experimented with new approaches, including using hedge funds, which have traditionally been used by short-term speculators and take both long and short positions on the markets.

This has played a part in boosting hedge fund interest, which has risen significantly.

Data from the the U.S. Commodity Futures Trading Commission showed net long positions held by non-commercial players in the major U.S. commodity futures markets hit an all-time high of more than 1.3 million lots on the final trading day of 2007.